How Did We Do? Gro’s Climate Risk Forecasts for 2023 Reviewed

At the beginning of 2023, Gro assembled a list of predictions for three major forces shaping global climate risk for the year. 

Today, Gro is looking back at those forecasts to see what we got right and what surprised us during a year marked by extreme weather and a record number of $1 billion-plus climate-driven disasters. 

2023 was the hottest year on record, producing devastating wildfires and drought that damaged crops and sapped river levels. But it was also a year of record clean energy investments, with Europe continuing to lead global progress on climate policy.

Next week we will publish our Climate Watchlist for 2024, with new forecasts for climate policy as well as physical climate risks. 

Driven both by policy and by climate-related impacts that are increasing in frequency and intensity, climate risk is now recognized as a business and financial risk. At Gro, we have the data and analytics to help financial institutions, governments, and corporate risk managers identify, address, and adapt to a warming climate and its many effects.

Here’s how Gro’s climate risk and policy forecasts panned out for 2023: 

Europe Will (Continue to) Drive Global Progress ✔️

What we predicted: The series of laws and policies focused on green investing, deforestation-free marketplaces, and sustainability and climate-related risk disclosure that European regulators rolled out between 2020-22 will begin to drive real change in the EU marketplace and beyond in 2023.

What we got right:  Europe’s efforts to fight climate change continued to progress in 2023 despite the ongoing war in Ukraine and new armed conflict in the eastern Mediterranean. The EU’s Corporate Sustainability Reporting Directive (CSRD) went into effect in early January 2023, mandating comprehensive sustainability and climate reporting for companies in the EU and the UK, which together account for about 14% of global market cap. In June, the EU’s new Regulation (EU) 2023/1115 on deforestation-free products began creating new compliance requirements for commodities including cattle, wood, cocoa, soy, palm oil, coffee, and rubber (and some of their derived products, such as leather, chocolate, tyres, or furniture) sold in the EU. Also in June, the EU issued additional regulations and guidance for Environmental, Social, and Governance (ESG) rating providers aimed at increasing “transparency on the market for sustainable investments.”

US Climate Progress Will Be Stalled by Partisanship ✔️

What we predicted: Headwinds facing federal climate policy in the US will strengthen after the Republican Party gained a majority in the House of Representatives in the November 2022 midterm elections. Outside of Congress, the SEC will finalize new climate-risk disclosure rules sometime in 2023.

What we got right: With a historic leadership battle and turnover in the House of Representatives in 2023, the US Congress has been effectively paralyzed beyond passing continuing funding resolutions to avoid a government shutdown. In the wake of that disruption, Congress has allowed the Farm Bill to expire and has taken no new legislative action to mitigate or adapt to climate change. Still, House Republicans continued to take aim at ESG investing last year, issuing subpoenas as part of a formal investigation to investment giants like BlackRock, State Street, and Vanguard. 

What we didn’t foresee: A year ago, we highlighted the SEC’s stated plan and goal to finalize new climate-disclosure rules in 2023 — but before spring came to the Northern Hemisphere, it was clear that was highly unlikely. The rules have yet to be finalized despite continued pressure from Democratic leaders in the US Senate. At this point, the SEC will likely wait until after the November 2024 elections to take any action.

Greater Focus on Proactive Adaptation to “Baked-In” Climate Change ✔️

What we predicted: Climate adaptation will become central to operational risk management across all enterprises. Investors increasingly will seek out new tools to access the physical risk profile of their investments along with the sustainability of those investments’ asset protections and adaptations.

What we got right: A year ago, Gro recommended that governments and companies prepare for a level of climate change-driven impact and disruption in 2023 that at least matched what we saw in 2022. Unfortunately, predictions from global models proved to be correct: 2023 was the hottest year on record globally, NASA data showed. The US experienced a record number of billion-dollar climate-related disasters — 28 of them in 2023, which was six more than in 2022 and 19 more than the 1980–2023 average.